By Matthew Spieler
(First of two parts)
With business conditions as tough as they are, going out and finding new business can be nearly impossible. So how can retailers maintain and even increase their bottom line when sales are stagnant to say the least?
While there are many ways this can be done, manufacturers of flooring software say one of the best and simplest ways is with inventory management systems. In other words, sometimes the best way to increase profits is to look within.
“Generally speaking, the largest assets of the typical flooring business are inventory, receivables, cash and work in process, said
Dev O’Reilly, president and CEO of
RollMaster Software. “Inventory control is not a science. More nearly, it is a set of methods for figuring out how much stock to order and when, how to receive it and what to do with it once it arrives.
O’Reilly promotes using software that is compatible with the industry’s B2B standard, especially when it comes to inventory management because the combination “will produce instant benefits to a flooring business of any size. A small purchasing mistake can be more disastrous than a big installation mistake. Most inventory difficulties develop not from large and obvious errors, but from small inefficiencies in the purchasing and inventory processes that remain unfixed for a long time.”
Chad Ogden, president of
QFloors, agreed, and noted, “Those who aren’t incorporating [inventory management software] typically don’t realize the benefits—financial, efficiency-related and time-wise— that can be gained through the right system. Many who are using business management systems are not using them to their full capacity (i.e., not producing monthly accrual- asis financial statements).”
He added there are a number of key benefits from properly using inventory management software: “First, it can produce monthly financial statements. This allows you to understand your profitability and make wiser business decisions. Second, it helps point out operational shortcomings. For example, it can help you see where your overhead is too high, or why your margins are too low. It can help you better identify where you are making and losing money. It also helps get everyone in the company on the same page and working seamlessly together, which helps prevent mistakes and dropped balls. Lastly, it allows your business to run more efficiently. This means you can handle more business with the same amount of people or the same amount of business with fewer people and less overhead.”
Confusing terminology
While there is a growing use of inventory management systems, some executives feel it could be higher except the word “inventory” has caused some confusion.
Don Kilbourne, vice president of sales for
Pacific Solutions, said, “In an accounting sense the word inventory is usually used to refer to materials purchased as stock, while most flooring management systems use the word to refer to any material that is going to enter and exit your warehouse, or more accurately, become property of your business, even if for a short period of time (and perhaps even if it is drop shipped).”
The importance of accurately controlling material, he added, “usually begins with this rule of thumb: No material goes into or out of your ownership unless your system knows about it. One of the most common loss areas in the industry is via the warehouse, and that may be the case even when nothing is being intentionally taken for inappropriate use.”
Not fully utilizing what the software can do is also a problem, noted Cathy Welsh, operations manager of
CDMS. “Many dealers try to use the software to work around their manual book paper procedures instead of revamping their internal procedures and allowing the software to streamline the entire sales process. We have worked for 26 years getting our customers to utilize the system the way it was designed.”
Proper usage can bring peace of mind, she added, “by knowing “your profit margin on each individual job. It allows you to make an adjustment to the sale or can even prevent you from selling a product at too low of a price.”
Different needs
Mark Magnuson of Kashmoo pointed out dealers need to investigate what system will work best for them because “different dealers want different things from their inventory systems.” For instance, “Stocking retailers require more interaction with each inventory item in the system, while non-stocking ones are looking for better ways to manage their order and receiving desks.”
Having the proper system, he added, means “Fewer mistakes, faster processing, and less paperwork. Ultimately, a good inventory management system will make the dealer more profitable because he will have less money tied up in inventory, and will be able to make decisions faster about what he has on hand.”
Terry Wheat, president of
RFMS, said having the right system is the first step, properly using it means “getting the proper training, following best practices and taking periodic inventories to see how accurate the inventory information is.”
He explained being properly trained, like everything else requires a retailer to keep up with the latest developments. “Continuing education is very import. With personnel turnover and new features being added, without some effort, best practices may not be updated, and efficiency may suffer. We are always adding new features to our software that make it easy for our dealers to search inventory and track important core stocking levels.”
(Editor’s note: In part two, we will look at what the leading software companies provide when it comes to inventory management systems.)
